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The liability capping framework and PI reform process
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Institute limitation of liability schemes – at last  
 
The approval of limitation of liability schemes represents the culmination of over 20 years of lobbying by the Institute for professional liability reform in Australia. The Institute was in the enviable position of being the first professional body in Australia to have schemes approved in all states (aside from Tasmania), an acknowledgement of our commitment to addressing the concerns of our members and to the public policy principles underlying the liability capping mechanism in this country.  
 
Professional Standards Legislation (PSL) enables professional bodies to establish schemes which legally limit the civil liability of their members. In return, the members of the professional bodies are committed to achieve and maintain the appropriate level and currency of professional qualifications and experience, to adhere to a prescribed code of ethics and to maintain business assets and/or insurance to meet claims made against them to a prescribed limit. The professional bodies are obliged to promote risk management procedures and conduct an effective process to discipline members who act contrary to professional requirements.  
 
Greater certainty and stability  
 
By specifying limits on damages to be awarded in relation to professional liability for Institute members, the Institute schemes will give greater certainty in relation to Professional Indemnity (PI) risks and should provide longer term stability to the PI insurance market.  
 
The adoption of proportionate liability and professional standards legislation in all states and territories, together with amendments to Commonwealth legislation provides the framework for an effective regime to cap the level of PI claims nationally. As at June 2008, the Institute now has most elements of the much anticipated ‘national framework of capping schemes’. While members in New South Wales have had a scheme in place since 1997 it is with the approval of schemes in other states and territories (and their prescription by the Commonwealth), that the capping of liability will now be fully effective.  
 
Tasmania  
 
Tasmanian professional standards legislation still presents an obstacle to achieving a truly national framework. As long as Tasmanian legislation contains the provision that the Institute must approve any application for a higher cap, without limitation, a similar scheme in Tasmania cannot be approved. The Institute is continuing its lobbying efforts to achieve consistent, effective professional standards legislation.  
 
Institute’s lobbying achievements

  • PSL now in force in all states and territories
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  • Commonwealth legislation (Treasury Legislation Amendment [Professional Standards] Act 2004)has been passed giving effect to those state schemes which are prescribed by the Commonwealth
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  • Professional Standards Councils (PSC) established in each State and Territory to approve, monitor, review, amend and revoke professional standards schemes
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  • Single PSC secretariat appointed.
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  • Schemes approved by the PSC in NSW, WA, SA, NT, Qld, ACT and Victoria.
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  • Commonwealth has prescribed the schemes in NSW and WA as well as in SA, NT, Qld, ACT and Victoria for a period of 12 months.
Professional liability reform process  
 
The first leg of the Institute’s strategy to achieving long term changes to a competitive and sustainable PI market in Australia for our members was to achieve an effective liability capping framework , with the adoption of proportional liability and professional standards legislation (PSL) in all states and territories. Together with amendments to Commonwealth legislation, the state and territory PSL provided the framework for an effective regime to cap the level of PI claims.  
 
Following passage of PSL in NSW, the PSC was constituted, as a statutory body, to consider and approve schemes presented by professional bodies and to drive the improvement of occupational standards and protection of consumers.  
 
The next step was the finalisation by state, territory and Commonwealth Governments of the administrative procedures to allow the approval of limitation of liability schemes with a single ‘national’ administrative body (the Professional Standards Council (PSC)), to process scheme applications and administer occupational schemes on behalf of the states, territories and the Commonwealth.  
 
However, with the potential benefits of PSL there are also obligations, and the Institute has been actively working with the PSC to meet the reporting, educational and monitoring requirements for our members. Some aspects of the risk management strategies required under the Act (such as claims monitoring) are key to the operation of the PSC Schemes. 
 
Campaign History 
 
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Last Update: 24 July 2008